Anyone who has undertaken a major home remodeling project knows the importance of clear, straightforward, two-way communication with contractors.
It would be ludicrous to give a contractor the keys and a budget without further information—a very risky move.
Instead, active engagement in project planning and execution is required. The customer and contractor must discuss the current use of space, clarify existing problems, articulate a common vision for the finished product, and establish a budget that matches the vision. This is the only way to ensure the remodel achieves the customer’s goals.
The same situation applies to the use of a supply chain consultant. For all their expertise, confidence, and promise, consultants are not psychics. They cannot take a quick walk around a fresh produce facility and create a master plan for supply chain success. If they do make such a promise, then you’ve probably chosen the wrong consultant!
A productive start to any supply chain consulting project requires advance preparation by the produce company. Many of these requirements were discussed in the first of this two-part series, in the January 2018 Supply Chain Solutions article. The consultant will also need factual information about your organization and operations to properly initiate the project.
Most importantly, you need to share insights regarding the ‘as-is’ condition of the supply chain processes to be investigated. This includes giving the consultant a broad understanding of product, information, and money flows; current performance versus goals; and problems that impede success. You could ask the consultant to do this work, but it would be time intensive and add cost to the project.
Project outcomes and future capabilities must be articulated as well; the goal is to clarify the scope of desired changes and measures for success. Of course, a budget and timeline for the project must be established, and the consultant will let you know if expectations are reasonable in light of these factors.
With well-defined starting and ending points and reasonable expectations established, the consultant can focus on the what and how elements of the project. This transformation initiative requires the consultant to analyze the targeted operation, seek feasible solutions, and identify a recommended path. It is up to you to accept or reject the strategic recommendations and to decide if the consultant’s expertise is needed for the implementation phase of the project.
While a consulting project can focus on any number of activities or the entire end-to-end network, it is logical to focus on the primary elements of a successful supply chain—procurement, distribution, transportation, and technology. Each section identifies a typical problem addressed by consulting projects, questions the consultant and client must address, and outcomes that can be achieved.
Anyone who has undertaken a major home remodeling project knows the importance of clear, straightforward, two-way communication with contractors.
It would be ludicrous to give a contractor the keys and a budget without further information—a very risky move.
Instead, active engagement in project planning and execution is required. The customer and contractor must discuss the current use of space, clarify existing problems, articulate a common vision for the finished product, and establish a budget that matches the vision. This is the only way to ensure the remodel achieves the customer’s goals.
The same situation applies to the use of a supply chain consultant. For all their expertise, confidence, and promise, consultants are not psychics. They cannot take a quick walk around a fresh produce facility and create a master plan for supply chain success. If they do make such a promise, then you’ve probably chosen the wrong consultant!
A productive start to any supply chain consulting project requires advance preparation by the produce company. Many of these requirements were discussed in the first of this two-part series, in the January 2018 Supply Chain Solutions article. The consultant will also need factual information about your organization and operations to properly initiate the project.
Most importantly, you need to share insights regarding the ‘as-is’ condition of the supply chain processes to be investigated. This includes giving the consultant a broad understanding of product, information, and money flows; current performance versus goals; and problems that impede success. You could ask the consultant to do this work, but it would be time intensive and add cost to the project.
Project outcomes and future capabilities must be articulated as well; the goal is to clarify the scope of desired changes and measures for success. Of course, a budget and timeline for the project must be established, and the consultant will let you know if expectations are reasonable in light of these factors.
With well-defined starting and ending points and reasonable expectations established, the consultant can focus on the what and how elements of the project. This transformation initiative requires the consultant to analyze the targeted operation, seek feasible solutions, and identify a recommended path. It is up to you to accept or reject the strategic recommendations and to decide if the consultant’s expertise is needed for the implementation phase of the project.
While a consulting project can focus on any number of activities or the entire end-to-end network, it is logical to focus on the primary elements of a successful supply chain—procurement, distribution, transportation, and technology. Each section identifies a typical problem addressed by consulting projects, questions the consultant and client must address, and outcomes that can be achieved.
Procurement – Sourcing Quality Product
The commoditized nature of the fresh produce business makes it difficult to optimize sourcing of quality product. Uncontrollable events—poor weather, surprise retailer promotions, or transportation capacity shortages—may throw the supply chain into disarray. The result is a product quality, quantity, and demand mismatch accompanied by rapid shifts in spot market prices for fresh fruits and vegetables.
These uncontrollable factors, combined with the increasing concentration of retailers, is forcing produce companies to rethink purchasing tactics. As volume shifts from spot markets to forward contracts with retailers, it is imperative for produce companies to align their supply resources with these retail commitments. An experienced consultant can help improve quality and significantly lower the total costs of acquiring the required volume and flow of products.
Project initiation requires a detailed response to this question: How are procurement operations currently conducted? To ascertain this knowledge, the consultant will review existing contracts, analyze spending, and assess dependence on spot market sourcing.
The capabilities of key growers and suppliers also warrants attention. Does the company work with best-in-class suppliers that consistently meet volume needs and quality standards? The consultant can help investigate whether the number of suppliers provides adequate capacity, technology, and geographic dispersion to meet demand for year-round supply.
Another important question is: Are there contingency plans for handling supply disruptions? Having effective backup sources of supply, both domestic and international, provides protection should primary suppliers run short of product.
A strategic sourcing project will address these concerns. The consultant’s goal is to help your organization make a strategic move from transactional spot market buying to relational contract-based procurement. Reshaping your operations and supply base will drive better pricing not subject to the whims of the spot market and achieve more consistent product flows with fewer disruptions. You will also become a priority customer with suppliers, which will help maintain inventory supply to profitably serve customers.
Distribution – Meeting Customer Requirements
Amazon may not be a direct competitor in the produce industry, but the company has greatly influenced supply chain service requirements. All industries are being challenged to provide greater service, speed, and variety to downstream customers and end consumers. Buyers also want to hold less inventory and receive replenishment orders with greater frequency to reduce costs and waste.
Like it or not, produce companies are being challenged to rethink traditional distribution strategies and pro-cesses. Smaller, faster, more frequent fulfillment requirements will likely affect cost dynamics, inventory requirements, and staffing. A consulting project focused on inventory levels and location, customer prioritization, and order sequencing may be needed to align distribution capabilities with evolving customer requirements.
Before embarking on process changes, it is important to step back and analyze sales. Simply stated: Is the market demand for product well understood? The consultant will ask questions about forecast accuracy and order pattern knowledge, then work to ensure that reasonable goals are set.
Here’s another question: Are the right number of facilities in the right locations effectively serving customer demand? In a rapid replenishment environment, poorly located distribution facilities will drive up transportation costs and extend order cycle time.
Within these distribution facilities is another question: Is the right amount of inventory available to satisfy customer requirements? Being in-stock in the right products is necessary to achieve fill rate and on-time delivery targets.
If the questions point to major service problems, the consultant may recommend a network redesign project that would involve adding, expanding, or relocating facilities to improve customer service. If the situation is not severe, then adoption of new forecasting tools, customer segmentation strategies, or inventory realignment can help ensure an organization profitably meets customers’ changing demand patterns and logistics requirements.
Transportation – Ensuring Affordable Capacity
Transportation accounts for more than 60 percent of logistics costs in the United States. The resulting freight bill for produce companies is enough
to create heavy interest in optimized spending. However, any consultant worth his or her salt knows that a narrowly focused cost reduction initiative is risky in a capacity constrained transportation marketplace.
Currently, carriers have the upper hand as there is more freight than they can handle. Hardball rate negotiations by a produce shipper will generate little carrier interest in moving the freight. In other cases, accepted loads may never be picked up if a better opportunity comes along, or a low revenue shipment may not receive a carrier’s best efforts. Hence, a more realistic project charter balances cost reduction, service improvement, and capacity availability targets.
To assess the opportunity for transportation improvement, the consultant will first ask questions about a produce company’s average freight rates, total spending, freight damage and waste, delivery delays, and size of its carrier base. These key performance indicators set the baseline for improvement.
The produce company must then look inward: Are the distribution and transportation teams easy to work with? If not, then it’s at risk—as carriers are being more selective, avoiding customers that disrespect drivers, fail to quickly load/unload equipment, or have overly complex requirements.
Finally, it’s necessary to analyze a key financial question: Is transportation spending effectively leveraged? Using too many carriers, relying too heavily on brokered loads, or failing to use contracts will create spending inefficiencies.
These issues can be addressed through an initiative to become a shipper of choice. A consultant can help identify top performing carriers, consolidate volume with select service providers via contracts, and take steps to create a driver-friendly environment. Adopting this partner-based approach will foster carrier loyalty, ensure capacity, and drive higher quality at freight rates fair to both parties.
Technology – Providing Rapid Visibility
The produce industry faces a host of compliance challenges and higher expectations: regulators are pushing for food safety and whole chain traceability; retailers want accurate advanced shipping notifications; and end consumers want fresh product with a longer shelf life. Failure to respond will cede market share to competitors.
Manual, paper-based processes or disconnected systems will not provide the information access needed to support these fundamental requirements. Produce companies must look for opportunities to embed technology into current processes. A systems upgrade, supported by a consultant who assists with software selection and implementation, may be needed.
Of course, an assessment of current information systems is needed before any technology investments are made, with the company asking: How well do current systems support the need for timely and complete visibility of the supply chain? Blind spots and information delays create compliance and service risks.
Another aspect of a technology assessment focuses on integration, raising a key question: Does the system share both internal and external information seamlessly? Poor integration leads to autonomous actions; there should be only one version of the truth that drives cross-chain decisions.
Another consideration is this: How is supply chain performance analyzed against external commitments and internal goals? If the answer is Excel spreadsheets, then the company risks using outdated information, failing to share results, and creating disconnected islands of insight.
A supply chain systems upgrade will pay multiple dividends. When properly implemented, this type of software project will improve connectivity and boost the cross-chain visibility needed for traceability. Stronger operational tools will help optimize procurement, distribution, and transportation processes. And, a more robust set of analytic capabilities will help with understanding changing demand patterns and how to respond accordingly.
Software implementation projects are fraught with the danger of vendors over-promising and under-delivering on the beneficial impact of their tools. To minimize this risk, work with a consultant who understands your needs, has experience with the systems being considered, and knows how to integrate the new tools into your existing platform.
Wrap Up
Supply chain capabilities are critical to the success of fresh produce businesses. Meeting customer demand while controlling costs and meeting profitability targets requires a capable set of procurement, distribution, transportation, and technology processes. Over time, these processes must be retooled to meet the rising expectations of retailers and thwart the expanding capabilities of competitors. However, most produce companies are challenged to simultaneously manage day-to-day operations and develop new capabilities.
Fortunately, consultants are available to support these capability development needs. They possess the expertise and resources to reshape current competencies into the desired supply chain capabilities that create competitive differentiation. Armed with adequate information about your current situation, a consultant will be able to create a customized plan of attack for supply base optimization, fulfillment service enhancement, transportation capacity management, technology deployment, or other desired capabilities.
With the ‘how-to’ plan in hand, it is then up to your organization to move forward. Competitive differentiation will only be achieved if you adopt the plan, invest the necessary resources, and make your supply chain team accountable for implementation success.
